In one matter we can be quite sure. Larry Summers is the most loyal Obama-sycophant of them all. He is, if you like, Heinrich Himmler to Adolf Hitler, loyal at least to the point in time when the Russian tanks were right outside the Berlin Reichstag.
Unsurprisingly, therefore, one day prior to his Master’s State of the Union Address, Loyal Larry’s syndicated column emits some vintage methane gas across Harvard Yard. There are only two ways to interpret Larry’s message: either the man is a seriously poorly-educated hydraulic Keynesian has-been, or he is a mendacious purveyor of White House snake oil.The two interpretations ultimately are entirely consistent. So I am not accusing Larry of outright hypocrisy.
Here in a nutshell is Larry’s message:
1. The U.S deficit is not a near-term priority. The debt problem should be kicked well down the road yet another time.
2. Budget-cuts implicit in the fiscal sequester due to take effect on March 1 should be thinned out over a much longer period of time. We simply cannot afford $85 billion in spending cuts when the 2013 budget deficit is running at a mere $1 trillion.
3. Fannie Mae and Freddie Mac should be right back in the mortgage market-place subsidizing lenders to support the housing market. House price bubble and junk mortgage bonds? The more the merrier. Government-agency bail-outs? Sure, since the government can always ensure that they are too big to fail.
4. The transformation of the North American energy sector must be accelerated.In particular,let us accelerate the obsolescence of all coal-fired sources of energy.
5. Unlike deficit reduction, where all the choices are painful, government measures to spur growth can benefit all Americans. There is such a thing as a free Keynesian lunch.
Readers may remember that Larry emitted an earlier vintage of methane gas in 2009. That vintage ended up as Stimulus I, quickly dissipating on the Massachusetts wind. Perhaps this time, Larry Summers, like Adolf Hitler, has gone vegetarian, in the hope that denser gas particulates find there way through the wind to a safe Keynesian harbor.
Hat Tip: Lawrence Summers, ‘There must be more to US policy than the deficit’, Financial Times, February 11, 2013